Munich Personal RePEc Archive

The perverse effects of hiring credits as a place-based policy: Evidence from Southern Italy

d'Agostino, Giorgio and Patriarca, Fabrizio and Pieroni, Luca and Scarlato, Margherita (2020): The perverse effects of hiring credits as a place-based policy: Evidence from Southern Italy.

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Abstract

This paper evaluates the wage effects of a tax credit policy on new hirings in Southern Italy. We use high-quality administrative data and propose a latent class inverse probability weighting method as a strategy to account for workers' unobserved heterogeneity. We find an unexpected negative effect of the tax cut on the wages of treated workers, which is more marked for women. Our results also provide new insights on the job-segregation dimension of the gender gap. We provide a theoretical model with worker and firm fixed effects to analyse the impact of employer tax cuts as a place-based policy in lagging regions.

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